ADF VII – Dealing with Africa’s Climate Change Financing Needs

“Africa has urgent and enormous climate change financing needs, but existing sources of financing and disbursement are inadequate,” said AfDB compliance and safeguards manager, Anthony Nyong, while speaking on financing climate change adaptation and mitigation action on Thursday, October 14, 2010 at the ongoing Seventh African Development Forum, in Addis Ababa, Ethiopia.

Climate change financing has been a thorny issue, particularly in the case of Africa, which is contributing less than 4% to global emissions, with 75% of this coming from deforestation. The African continent is highly vulnerable to climate change, and it is critical to obtain sufficient financial support to manage adaptation and mitigation processes.

Of the 22 climate funds globally available, none is hosted in Africa. The 2009 UN climate change conference (COP 15) held in Copenhagen has secured a non-obliging political agreement to make USD 30 billion available by 2012 in new and additional fast track resources, with additional USD 100 billion to be raised annually by 2020. African leaders have asked for at least 40% of the resources to be allocated to Africa and to be managed by the African Development Bank.

The AfDB is Africa’s premier development finance institution, and climate is a developmental issue, Mr. Nyong said, underscoring the position about Africa’s right to host money allocated to it.

Mr. Nyong noted that Africa was not well served by existing financing mechanisms since the continent’s unique problems such as high vulnerability to climate change and unique emission patterns related to agriculture and land use are never factored into the design of global funds. He called for a more appropriate financing mechanism such as the Africa Green Fund announced during ADF VII.

The impact of climate change will also affect Africa’s ability to meet the MDGs. The continent already has the largest proportion of people living below the 1.25 dollar-a-day line, and the largest gap between 2005 and 2015 MDG targets for poverty.

“We need tens of billions of dollars per annum,” Mr. Nyong said. Less than five years from now, by 2015, it will take between USD 22 billion and USD 31 billion per year for adaptation and to put the continent on a low carbon growth pathway. In another 15 years, that will go up to between USD 52 billion and USD 68 billion per year. In addition to that, climate-proofing will add 40% to the cost of meeting the MDGs. This will require international financial assistance estimated at USD 100 billion a year over the next decade, Mr. Nyong pointed out.

“The benefits of adapting now far outweigh the cost of doing it later,” he said. The carbon market has not brought much money to Africa so far. Several hundred projects in Mexico, Brazil, India and China are financed under the CDM. There are only a handful of CDM projects in South Africa and very few others on the rest of the continent.

“Africa is not benefiting from the CDM because emissions from agriculture and other land use practices are not included in it, whereas these are important parts of the African economy,” Mr. Nyong said.

From 2006 to 2009, sub-Saharan Africa received 12% of the climate change financing disbursements through multilateral development banks, the smallest share among all regions in the world. Even so, a large chunk of the 12% that came to Africa was used for mitigation alone.